AIG Getting Into the Real Estate Business

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The Real Estate Marketing Insider comments on news in Bloomberg Businessweek that insurance giant American International Group Inc. (AIG) is increasing its investments in real estate.

REMI released a statement today regarding news from Bloomberg Businessweek that American insurance conglomerate AIG is increasing its direct investment in real estate, stating that this was good news for the real estate market, as big-company investment in actual property rather than securities or high-risk mortgages would help to prevent another housing crash.

American International Group Inc. (AIG) was among the companies to receive a government bailout after its meltdown in 2008. It has since then been trying to decrease its government dependency, most recently by buying back mortgage bonds assumed by the New York Federal Reserve Bank. In attempting to replace the government’s holdings in the company (still 16 percent) with private investors, AIG is working to increase its holdings in real estate; the firm is increasing direct lending and home loans, along with rental property investment.

This news comes along with a statement from CEO of AIG Robert Benmosche expressing desire not to get back to commercial mortgage-backed securities and other high-risk investments like the company’s 2008 holdings. “It’s making sure that we are taking control of the risks we’re going to put on our books, and we can’t rely on the public markets.”

This statement, in turn, likely refers to concern among investors that underwriting standards for commercial mortgage-backed securities are declining due to record-low interest rates, artificially kept low by the Fed. Even if AIG did intend to return to mortgage-backed securities, the yield potential isn’t there; Benmosche has said that AIG needs to invest another $50 billion into high-yield assets. REMI suggests real estate site design.

AIG’s real estate designs can already be seen; as of June 30, the insurer’s real estate investments amounted to $2.92 billion, a 5.1-percent increase over six months prior. The same data showed AIG’s commercial mortgage holding at $13.7 billion, a year-over-year increase of $400 million ($0.4 billion) but still a relatively-small increase (less than 3 percent) compared to its real estate investment growth.

The Real Estate Marketing Insider commented on news that insurance giant AIG was shifting more of its capital to direct investments in real estate. The company’s CEO has said that the firm is trying to decrease reliance on public-market investments. The market for mortgage-backed securities, one of the firm’s largest pre-bailout holdings, is generally perceived as weak due to record-low interest rates.

About Real Estate Marketing Insider: Real Estate Marketing Insider is an online journal that provides real estate professionals with breaking news, hot tips and trend analysis. The journal is based in La Jolla, CA.

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